American International Group Inc. says it is replacing its chief financial officer, canceling 160 events, and seeking to recover more than $40 million in payments made to two former executives.
AIG, New York, issued the announcement together with New York Attorney General Andrew Cuomo.
Cuomo threatened earlier this week to sue AIG unless it acted to recover “unwarranted and outrageous” spending on trips and golden parachutes for executives at a time when it is depending on an $85 billion government credit line.
AIG’s agreement to act on spending came after a “candid discussion” Cuomo held in his office with AIG Chairman Edward Liddy, according to Cuomo and AIG.
AIG says it will provide an accounting of executive compensation and assist Cuomo’s office in “recovering any illegal expenditures.”
The review will include “all forms of compensation paid to former [AIG Chief Executive Officer] Martin Sullivan and the former head of the Financial Products Unit, Joseph Cassano,” according to Cuomo and AIG.
In 2007, as AIG was losing $5 billion in the final quarter, the company awarded Sullivan a cash bonus of more than $5 million and a contract that included a $15 million golden parachute provision.
Cassano, who ran a derivatives unit that exposed AIG to many billions of dollars in credit default swaps collateral calls, was let go in February without cause and allowed to keep up to $34 million in unvested bonuses. He also was placed on a $1 million retainer by AIG.
In related news, AIG has named David Herzog to take over as executive vice president and chief financial officer.
Herzog succeds Steven Bensinger, who has been vice chairman for financial services and acting CFO since May.
Bensinger will not get the multi-million-dollar pay package that had been previously arranged, AIG says.
Canceling meetings should save another $8 million, AIG says.
The events canceled include:
- A “best operator” conference. (Las Vegas – $750,000)
- A risk management conference. (Half Moon Bay, Calif. – $500,000)
- A November sales conference. ($350,000)
- A January 2009 meeting. (Scottsdale, Ariz. – $190,000)
“We’re very grateful for the guidance of Attorney General Cuomo,” Liddy says in a statement about the cost-control efforts. “We know that the attorney general shares our commitment to rebuilding AIG’s business and paying back the U.S. taxpayer, and we will address the attorney general’s concerns expeditiously.”
Cuomo says the control-efforts are not intended to affect the compensation of most AIG employees. Those employees “are essential to rebuilding AIG and the economy of New York,” Cuomo says.